Asia Stocks recap: Asia may profit as America barbecues

May 25, 2014, 8:07 PM ET

Reuters

Welcome to the Asia Stocks live blog, a running account of what the region’s share markets are doing, along with other news. While the U.S. will be shut Monday for Memorial Day (a holiday that honors America’s war dead, but has also been associated with the first barbecue parties of the year), Asian bourses look primed for gains, with Japan profiting from an easing for the yen.

So Credit Suisse was out with a note late last week entitled “China: The turning point in growth.”

As you would expect from the title, the analysts said they “believe that the worst in terms of the economy losing momentum is perhaps behind us.” Sure, there’s a “perhaps” in there, and Credit Suisse admitted to lingering challenges for China, such as the weak property market and soft fixed-asset investment, but the overall tone was upbeat, and the bank also hiked its GDP outlook for the current quarter.

A solid chunk of the optimism is based on Credit Suisse’s “Li Keqiang Momentum Index.” Li Keqiang, the current premier of China, once famously said that he harbored some doubts about high-profile Chinese economic data, preferring instead to look at second-tier statistics such as railroad freight volumes and industrial usage of electricity.

Based on Li’s favorite metrics, there is light at the end of the tunnel, or so says Credit Suisse: “Credit Suisse’s Li Keqiang Momentum Index suggests that the Chinese economy is showing signs of growth bottoming out,” though the turnaround is “tentative and from a low level.”

Unfortunately, however, this isn’t the first time Credit Suisse (and — who knows — perhaps Li himself?) have perceived a bottom, only to see the hoped-for rebound slip away.

Consider a Credit Suisse note from back in August of last year, entitled “China: Growth has bottomed.” In it, the bank’s analysts write: “The Credit Suisse Li Keqiang Momentum Index shows that the economy has bottomed, and commercial activities have improved recently.”

To be fair, that August note also included the caveat that “China is not out of [the] woods yet,” citing weak private-sector investment as a particular worry. So, maybe the concerns mentioned in last week’s Li Keqiang Index update might be worth more focus than the headline conclusion.

Japan is trading higher this morning — the Nikkei Average is up 0.7% and the Topix is 0.9% higher — with a weakening yen as the prime mover.

Toward the end of last week, the dollar was bobbing up and down around the mid-¥101 level, with a modest advance ahead of and during Friday’s session helping send the Nikkei Average to a 0.9% gain. But after the market close, The Wall Street Journal ran an interview with Bank of Japan Gov. Haruhiko Kuroda, who said the yen seemed too high.

“I don’t think it’s reasonable to expect the yen to appreciate against the dollar,” the newspaper quoted Kuroda as saying.

And so this morning, we see the dollar back up at ¥102. That (and to some extent, Friday’s climb for U.S. tech stocks), has the Japanese tech majors marching to higher ground: Sony is up 3%, Sharp is up 2.2%, Fuji Electric is up 2.3%, Renesas Electronics is up 3.9%, and Nikon — after some cruel losses last week — is bouncing 4.5% higher.

Meanwhile, with the S&P 500 scoring its first close above 1,900 Friday on Wall Street, the brokers are outperforming as well: Nomura is up 2.3%, and Daiwa is up 2.7%.

Australia’s market is crawling higher in morning action, with the ASX 200 up 0.2% (after gaining 0.2% on Friday) with miners leading the parade, despite a mixed picture for commodities.

Among the early gainers in resource space, Rio Tinto is up 0.5%, Fortescue is up 0.7%, Alumina is up 2.4%, Oz Minerals is up 2.9%, and Whitehaven Coal is up 2%. (And if you’re wondering, BHP Billiton is up just 0.1%). The share moves come in the wake of gains for copper but continued weakness for iron ore.

Over in the financial sector, ANZ and Westpac are up 0.3% each, and CBA is up 0.2%, but NAB is down 0.2% after J.P. Morgan cut the lender’s shares to underweight from neutral, citing margin pressures (this, according to Dow Jones Newswires).

Shares of Woodside Petroleum, are 0.1% higher, while Oil Search is ahead by 0.5% after trading flat earlier. Deutsche Bank says Woodside’s own guidelines for investment mean it’s unlikely to bid for Oil Search, as some have suggested.

Speaking of Deutsche Bank, its analysts also said they see Telstra as unlikely to meet its goal of drawing at least a third of its revenue from abroad by the end of the decade (again, hat tip to Dow Jones Newswires for this). Shares of Telstra — Australia’s top telecom — are down 0.6%.

The Hang Seng Index is now above the key 23,000 mark, up 0.4% at 23,048 after a slim 0.1% advance Friday. The Shanghai Composite Index is also gaining, eyeing its second consecutive advance as it sits 0.2% higher.

Tech stocks are outperforming the index in Hong Kong, with online major Tencent Holdings rising 0.7%. Outside the Hang Seng Index, online-game developer NetDragon Websoft is jumping 6.6%, while both Kingsoft Corp. and Kingdee International Software Group are up 2.5%.

Most Chinese developers are extending Friday’s rally as investors cheer a state-media news report saying the country’s restrictions on housing purchases may loosen in all but the largest Chinese cities. Gainers in the sector include Guangzhou R&F Properties Co. (up 1.7%), China Overseas Land & Investment (up 1.5%), China Resources Land (up 1%), and Poly Property Group (up 0.8%).

However, BYD Co., the maker of electric cars and batteries, partly owned by Warren Buffett, is dropping by 5% after the company said it plans to raise 4.27 billion Hong Kong dollars ($555 million) in a share placement, with the selling price 15% below the shares’ last closing value before trading was suspended.

Top U.S. consulting companies might be the latest victims in spiraling U.S.-China tensions over spying and trade issues, with their smaller Chinese rivals poised to benefit from a reported ban.

Stocks of CCID Consulting Co., a state-owned Chinese consulting company, initially rose 2% in early Monday trading after a Financial Times report said Sunday that China had ordered state-owned enterprises to sever ties with U.S. consultants.

The move was reportedly made out of fear of alleged spying activities, with those excluded from Chinese contracts including U.S. industry majors McKinsey and Boston Consulting Group, the report said.

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